Financing and Credit

Some investors suggested that home prices would fall after mortgage interest rates rose, adding further difficulties to those who might otherwise want to sell their homes and move.

Home prices, however, are not likely to fall after interest rates rise. There’s logic for thinking so, but it’s incomplete logic.

Here’s why home prices might be thought to fall. A house is a long-lived asset. The value of any such asset (real estate, stock share, or bond) is the sum of the future stream of cash flow or benefits, discounted by the interest rate. With higher interest rates, the discounting reduces the present value of those future income (or psychic benefit) streams.

Up to 2.5 million formerly foreclosed homeowners — or those who sold while in the foreclosure process — could be re-entering the housing market as buyers much faster than anticipated thanks to a recent change in Federal Housing Administration (FHA) guidelines.

Close to 2.5 million additional boomerang buyers who lost their home to foreclosure or short sale in the past two years now could be eligible to get financing to buy again under revised FHA guidelines.

I’m here to present about the tax implications of foreclosures at the CCH User Conference, and that’s no laughing matter.

After teaching today’s class, it dawned on me that a particular area of the discussion warrants a quick PSA:

If you are one of the 97% of Americans whose home is worth significantly less than when you purchased it, you’ve likely been seeking out some type of debt modification with your lender. Or perhaps things have gotten so bad that you’re contemplating a foreclosure or short sale.

The former FDIC chairman’s book, “Bull By The Horns,” has several chapters on the housing crisis. She fought hard, according to her account, for something different and better to help damaged borrowers. She can now say that the OCC/Fed “lookback” reviews mandated by April 2011 consent orders are a “ruse and a waste of time and money.”

Mortgage pre-approvals are pretend documents. It is true that preliminary mortgage approval is an essential first step in the home buying process as real estate agents and sellers want proof of a buyer’s ability to secure a mortgage and bid on a property. Buyers want it to know what their buying power is and what their potential payments and costs will be. Mortgage people see it as the first date in the courting process with new buyers. Everybody sees it as a good idea, a prudent and powerful first step on the oft perilous journey to homeownership. So what’s the problem?
The Fed, QEs and the Housing Market Recovery Needs Jobs Mark Greene Mark Greene Contributor
The Perfect Loan File Mark Greene Mark Greene Contributor

The brand new Consumer Financial Protection Bureau (CFPB) has arrived and is ready to save the citizens from getting a mortgage they can’t afford to pay back. The Ability-to-Repay Rule was enacted to inject common sense into mortgage lending and borrowing practices, because lenders and consumers had clearly demonstrated that they could not do so on their own. This would be a correct analysis given the depth of the mortgage mania that resulted in the mortgage meltdown that began in 2007.

We recently profiled a few expected trends in real estate for 2014 across the nation. While these trends will undoubtedly play a role in real estate, particularly for investors, one important trend wasn’t mentioned – the steady rise in mortgage rates.

Only a couple of years ago, we saw mortgage rates hit record lows. Now, the current rate for a 30-year fixed rate mortgage is 4.50%, and experts predict this figure, by the end of 2014, could hit 5% and beyond.

Naturally, this bothers some investors and buyers. Experts are already predicting that higher mortgage rates will put a damper on the recovery. It makes sense; a monthly payment for a $200,000 house rises by $120 as you go from 4.5% to 5.5%.

Financing is important in many areas of real estate. Including with investing. Whether you are buying a property to live in, or buying a property to hold on to as an investment property, financing can make or break good/great deals. So doing everything you can do to boost your credit score is going to make a big difference if you’re looking to hold onto properties for cashflow.
I found a great article that gives a few simple ideas of things you can do in order to raise your credit score. I hope you get a few ideas from this like I did. Enjoy.
Boost Your Credit Score to Buy a Home
Buy, Credit Score, Finance
By: Michele Lerner

Dean gave an excellent diamond of information about using Hard Money to find great deals.

How do you find hard money then? Here are some of my favorites:

How to find Hard Money Lender through various means:
- Internet
o This is a hard way to find “private hard money”.
 You will find a lot of “conventional” hard money lenders this way. Because the lender is on the internet with a lot of traffic they are very strict with how they lend.
- Newspapers / Penny Savers
o This is a great way to find lenders. You will need to watch the papers regularly. On occasion hard money lenders in your area will place an ad that they have money. Call these ads.

In the investor world, obtaining funding for a property or project is partially a marketing process. Obviously you cannot change the hard numbers of credit scores or debt to income ratios instantaneously, but you must favorably represent yourself, the project, and your ability to repay the loan in a favorable light. The executive summary is the marketing piece favored in the business world, including the lending world to present the lender with the information they need to make an informed decision. I am including an article here that summarizes the needed content for a commercial loan executive summary. The thing I like most is that it was written by a mortgage broker, and presents what they are looking for to properly decide.